Oil industry leaders search for answers after election

11 08, 2012 by Daily Advertiser

The morning after the nation re-elected President Barack Obama, Acadiana oil and gas leaders did not hide their disappointment.

Nor did National Ocean Industries Association President Randall Luthi.

"This is basically the representation of the speech I had hoped to give," Luthi said before ripping apart a few sheets of pages to laughter and cheers. "There's got to be a morning after and, unfortunately, today is that morning after. I think a lot of us are picking up the pieces and trying to figure out where we are going to go from here."

Luthi spoke Wednesday to industry leaders on "The State of the Gulf of Mexico Oil & Gas Industry," part of the Greater Lafayette Chamber of Commerce's "Food For Thought" Series. The Daily Advertiser was the exclusive media sponsor for the event.

Luthi told attendees that he did not "think it's going to get any worse," under Obama and the industry will continue to thrive, but it could be better. He, and other industry leaders, had hoped that Republican MItt Romney would be elected and, under his administration, more areas would open up for exploration, and regulations would loosened. Under Obama, federal inspections became more costly and the permitting process became more time consuming, Luthi said.

"In spite of what I consider this deeply disappointing administration's plan, things are on the uptick, and you know it far better than I do. Rigs and jobs are beginning to return to the Gulf of Mexico. Most financial gurus are predicting a good 2013 for the offshore energy industry," Luthi said. "However, I would argue that it's not going to come without a price. I think it's way too early to decide how high that price is going to be, whether it will have a stopping or stalling effect on the industry, but there will be a price to pay."

The Obama administration imposed a five-month moratorium on deepwater drilling permits after the April 2010 BP oil spill, which killed 11 workers on the Deepwater Horizon platform and spilled more than 4 million barrels of oil into the Gulf of Mexico before the flow could be halted the following July.

The industry has criticized increased regulatory requirements and permitting delays introduced in response to the spill.

During the presidential debates, Obama pointed to increased oil and gas production during his term — much of it from the application of hydraulic "fracking" and horizontal drilling techniques, and much of it on private rather than public lands.

But he also criticizes oil companies for failing to begin production on large numbers of oil leases.

Obama has also spoken in favor of eliminating tax breaks for oil and gas exploration. The biggest question mark may be whether climate change, which has lost importance in national policy discussions since the BP spill, will occupy a more prominent place on the administration's second-term agenda.

Although Obama might want to eliminate some of the industry's current tax deductions, Luthi did not think that sort of change would have enough support to pass Congress.

He expects regulations to "fly out" of government offices in the coming weeks, with Democrats feeling "reinvigorated" after their win.

More regulations would increase the "overall cost of business," as will inspection fees that Luthi expects to stay in place and perhaps increase.

And, although more permits are being produced, companies must fill out more paperwork and agencies must review more paperwork.

"It takes longer now to get a permit than it used to, and it will continue to be so," Luthi said.

"What the fear is is that those permits that you have been getting just in time, because of increased activity in the Gulf of Mexico, some of those permits may now be getting there a little too late."

Oil and gas industry employment increased by 8.3 percent from September 2011 to September 2012, Luthi said.

In recent years, the United States has become "the Saudi Arabia of natural gas."

That resource and other energy options will be used more in the next 20 years, but petroleum will continue to be king, Luthi said.

It should continue to see good growth, and North American energy independence could be a possibility under the right policies, Luthi said.

Before becoming NOIA president, Luthi served as the director of the Minerals Management Service from July 2007 through January 2009 under the Bush administration.

He argued that Obama's approval of a basically unchanged five-year offshore plan that did not open up more areas for offshore operation — despite moratoriums on some areas being lifted — was not the right policy. "Eighty-five percent of the offshore United States will remain closed to offshore exploration and development.

"We will continue to look in the same 15 percent that we have continued to look in for the next generation and a half," Luthi said.

And, although the U.S. has increased its oil production over the last four years, Luthi said he did not agree with the way it was portrayed during the election.

"Where has that production taken place? ...

"Federal lands are what the administration has control of," Luthi said.

"So, I would state that the production is actually up in spite of the current federal policies.

"Ninety-six percent of the increase of oil and gas has come from private and state lands."

The industry will continue to grow in spite of policies, and all it can do not is try to work with the Obama administration to move forward, Luthi said.

"It did not end up the way most of us, me personally, and I think most of us in the industry had hoped.

"One of the odd takeaways from this election is the irony of it all.

"Poll after poll after poll, Americans said, 'We are tired of the status quo. We are tired of the gridlock.'

"So what did we do? We re-elected the gridlock," Luthi said.